India Reassesses Cryptocurrency Regulations During Global Policy Shifts

As the regulatory environment around the world changes, India is reviewing its cryptocurrency policies. Ajay Seth, the secretary of economic affairs, acknowledged that a review has been necessitated by shifting global perceptions of digital assets. India’s cryptocurrency discussion paper, which was initially scheduled for September 2024, has been delayed as a result.

“More than one or two jurisdictions have changed their stance towards cryptocurrency in terms of the usage, their acceptance, where do they see the importance of crypto assets. In that stride, we are having a look at the discussion paper once again,” Seth told Reuters.

This reassessment follows an executive order from President Donald Trump, directing U.S. agencies to evaluate digital asset regulations. While the order did not name Bitcoin or other cryptocurrencies, it emphasized examining the feasibility of a national digital asset stockpile.

India’s Tight Crypto Rules and Market Growth

Despite strict regulations, cryptocurrency investment in India continues to rise. The government imposes a 30% capital gains tax and a 1% TDS on crypto transactions, creating challenges for traders. Additionally, the Financial Intelligence Unit (FIU) actively enforces compliance. In December 2023, the FIU issued notices to nine offshore crypto platforms, while Binance paid a $2.25 million fine in June 2024 to resume operations in India.

The dangers of private digital currencies have been repeatedly highlighted by the Reserve Bank of India (RBI). These worries were reaffirmed in its December 2024 Financial Stability Report. Nonetheless, a multi-agency strategy to regulating crypto assets has been proposed by certain regulatory authorities, such as the market regulator in India. This suggests a potential move away from a complete ban and toward restricted use of digital assets.

There are further challenges in India’s tax structure. Crypto merchants are unable to deduct losses, and transactions totaling more than ₹50,000 in a fiscal year are subject to required deductions. Regulations are overseen by a number of organizations, such as the RBI, Ministry of Finance, and SEBI, which makes things more complicated for investors.

Despite the fact that cryptocurrencies are currently not accepted as legal cash in India, continuing policy talks point to possible regulatory changes.